TMI Blog2015 (11) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... ed part addition - Held that:- Since the Rule-8D of I.T.Rules, 1962 is not applicable, therefore in our considered view the AO was not justified in applying the Rule 8D for making disallowance. The ld.CIT(A) has given a finding that the assessee was having substantial funds and lesser borrowed funds. This finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record, therefore, we do not see any reason to interfere with the finding of the ld.CIT(A), same is hereby upheld. - Decided in favour of assessee. The assessee has made investment and earned exempt income of ₹ 3 lacs. Therefore, we do not see any reason to interfere with the finding of the ld.CIT(A) on this issue because it cannot be assumed that the exempt income has been earned without incurring any administrative expenditure. Thus, ground raised in assessee’s cross-objection is partly allowed. - I.T.A. No.1181/Ahd/2011, CO No.158/Ahd/2011 - - - Dated:- 9-10-2015 - SHRI KUL BHARAT, JUDICIAL MEMBER And SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri R.P.Maurya, Sr.DR For The Assessee : Shri P.M. Mehta, AR ORDER PER SHRI KUL BHARAT, JUDICIAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance in respect of NSE penalty, deleted the addition of ₹ 25,39,171/- made on disallowance in respect of sale stock in trade treated as deemed speculation transaction, deleted the addition of ₹ 1,82,398/- made on disallowance in respect of interest and confirmed addition of ₹ 25,23,437/- made on disallowance in respect of excess depreciation and also restricted the addition of ₹ 44,42,330/- made on disallowance u/s.14A of the Act to the extent of ₹ 6 lacs. Aggrieved by the order of the ld.CIT(A), the Revenue is now in appeal before us. 3. First ground of this appeal is against the deletion of addition of ₹ 2,38,675/-. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition(s). He submitted that the expenditure was claimed by the assessee as a penalty levied by NSE. 3.1. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that this issue is covered in favour of assessee by the decision of the Tribunal as relied upon by the ld.CIT(A) rendered in the case of Goldcrest Capital Markets Ltd. vs. ITO reported at (2010) 130 TTJ (Mum) 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of ₹ 1,82,398/- made on account of disallowance of interest. The ld.Sr.DR supported the order of the AO and submitted that the ld.CIT(A) was not justified in deleting the addition. The ld.Sr.DR submitted that the AO has given a finding on fact that the assessee has given advances to associated-concern on which no interest has been charged, whereas the assessee has paid the interest @12%. 5.1. On the contrary, the ld.counsel for the assessee supported the order of the ld.CIT(A) and submitted that there is no infirmity in the order of the ld.CIT(A). He submitted that similar disallowance was made in the earlier years. In the AY 2004-05, the matter travelled upto the stage of Tribunal and the Tribunal had deleted the disallowance and the disallowance made in AY 2005-06 was deleted by the predecessor of the ld.CIT(A). 6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The Revenue has not pointed out as to how the facts are different in the assessment year under appeal. Therefore, taking a consistent view, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made regarding the funds both self and borrowed available with .. a) the assessee was given a task to establish direct nexus with his own funds or borrowed funds on the date the investments on which no income is taxable were made. The assessee could not establish this. b) It is a fact that the assessee has substantial own funds and lesser borrowed funds. Although theoretically the investments in the present year could be claimed to be made from own funds, but the possibility of borrowed funds being used for the purpose cannot be categorically ruled out. c) The assessee had total 6.29 crores as interest income (1.40 crores from FDR and 4.88 crores from delayed payments received from clients of business); and against this the assessee had total interest expenditure of 4.50 crore (1.88 crores paid to clients of business, 2.20 crores paid to bank and 40 Lacs to others). In this way the assessee has actually earned net interest of 1.79 crores. The apportionment of interest expenses in the above circumstances, considering the above facts with assessee having considerable surplus own money, net interest income rather than expense, but no direct nexus provable one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case, the CIT(A) erred in holding that it was a fit case for effecting some disallowance u/s.14A and has further erred in quantifying such disallowance in a sum of ₹ 6,00,000. 3. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same. 12. At the outset, ld.counsel for the assessee submitted that he does not wish to press ground No.1 of cross-objection. The ld.Sr.DR has no objection. Therefore, in view of the statement made by the ld.counsel for the assessee, ground No.1 of cross-objection filed by the assessee is dismissed as not pressed. 13. Ground No.2 is against restricting the disallowance to the extent of ₹ 6 lacs by invoking the provisions of section 14A of the Act. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justifieid in restricting the disallowance. The ld.counsel for the assessee reiterated the submissions as were made in ITA No.1181/Ahd/2011-Revenue s appeal(supra). The ld.counsel for the assessee submitted that for applying the provisions of section 14A of the Act, it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the ld.CIT(A) confirmed the addition on the basis that apportionment of interest expenses by considering the facts that the assessee was having considerable surplus own-money, net interest income rather than expense, but no direct nexus provable one way or the other; can best be an estimate. He further concluded that ₹ 1.88 crores paid to clients of business is wholly and ₹ 2.20 crores paid to bank is mainly related to payment for depositing margin money s which has been more than offset by interest income from clients. The remaining interest can be said to be possibly paid for partly business assets and partly for investments, that too which have not been met from own funds. In totality of circumstances, particularly looking at huge own funds and surplus interest income; and in absence of proof that borrowed funds have at all not been used for making investments earning non-taxable income. The ld.CIT(A) deemed it proper and reasonable to apportion ₹ 4 lacs as interest cost to be disallowed u/s.14A. This reasoning of the ld.CIT(A) is contrary to the judicial pronouncements as relied upon by the ld.counsel for the assessee. Therefore, we are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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